social care and health - delegation of budget management ... · 1.1.6 the broad conclusions of the...

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Report to the City Council 05 April 2005

Budget Delegation

05 April 2005 Report to the City Council

Social Care and Health -Delegation of Budget Management to the Area Directors and their teams with effect from 1 April 2004

Further copies of this report can be obtained from:

Research and Policy Officer: Ajmal Hussain : 0121 303 1520

E-mail: [email protected] Reports that have been submitted to Council can be downloaded from

www.birmingham.gov.uk/scrutiny.

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Contents

1 Summary 5

2 Terms of Reference 7 2.1 Reasons for the review 7 2.2 The Committee and its Terms of Reference 7 2.3 Methodology 7

3 Findings - The Context 9 3.1 Background and Context 9

4 Findings 10 4.1 Introduction 10 4.2 Delegating the Budget to Areas 10 4.3 Policies and Practices 11 4.4 Management Arrangements 12 4.5 Information 12

5 Evidence provided by Paul Cook of the Recovery Team 14

6 Conclusions 16 6.1 Conclusions 16

7 Recommendations 18

8 Appendices 20 8.1 Appendix 1: Terms of Reference 20 8.2 Appendix 2: Review Work Programme 23 8.3 Appendix 3: Management Structure 25

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Preface

By Councillor Len Clark Chairman, Social Care

Overview and Scrutiny Committee 5 April 2005

The initial decision to undertake a review of budget delegation to the area quadrants was taken by the previous Social Care and Overview Scrutiny Committee but was delayed pending full implementation of the new arrangements. The decision to restructure and devolve services was primarily in response to the service being placed in special measures following the CSCI inspection in November 2002 and the reorganisation of the Primary Care Trusts in the city. The Directorate recognised the urgent need for service reconfiguration and a devolved partnership management model to respond effectively to these challenges.

This review presented the first opportunity to investigate the delegation of budgets to the four Area Directors and their teams, and produce recommendations to assist the Directorate in successfully achieving the original aims and objectives of budget delegation. There were specific issues the review chose not to consider, such as the principle and rationale of reorganisation, the area model selected and the current financial overspend within the Directorate. Instead, this review concerned itself with the preparation and planning prior to implementation and how robust were the processes and support mechanisms that were in place to ensure budget delegation was successfully implemented and thereafter professionally managed as authorised by the Council.

The review concluded that once the principle and model for reorganisation had been agreed, sufficient regard was not afforded to the organisational fragility evident at senior management level within the Department, when deciding on the timescale and schedule of implementation. Prospects for successful change would have been better if the plans and programme had been adjusted to allow for key management personnel to be appointed to oversee and direct the change. It also became evident during the review that important information and financial management systems had not been fully developed and tested and that a commissioning strategy adopted to assist the formation of activity plans at area level to conform with budget allocations. Area Directors advised the review that key financial management posts were also vacant during implementation and that the necessary training and skills development programmes had not been completed. In essence, the Directorate had little capacity to deal with the unexpected as it had no contingency plans or fallback

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positions.

The evidence provided to the Committee was conclusive. The Committee found that a key lesson has emerged for the City Council: fundamental organisational change should not be implemented without a comprehensive risk assessment, particularly in complex and acutely sensitive services such as Social Care.

The review report contains 14 recommendations, all of which are of fundamental importance encompassing all areas including delegating the budget to the areas, management systems, policies and practices, sharing of information and ensuring appropriate authorisation for budget variations.

One key issue outside the terms of reference of the review that arose was the relationship between services to be managed directly at an area level and citywide services managed by a specific Area Director on behalf of the Directorate. It became clear during the review that the management arrangements in relation to commissioning and provider functions within the Learning Difficulties services need to be reviewed. A review of Foster Care Services should also be considered.

The review took advantage of the opportunity to take evidence from Paul Cook, the Financial Consultant engaged in the Budget Recovery Team for Social Care. The review’s conclusions and recommendations were reinforced by the Recovery Team and a particular recommendation regarding the line management of Area Heads of Resources was adopted in response to the Consultant’s conclusions.

I would like to thank my colleagues on the review panel for dedicating their time and enthusiasm to this important review. Officers also contributed to the success of this review and I would like to thank them for their valuable input.

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1 Summary

1.1.1 The Social Care Overview and Scrutiny Committee initiated this review in order to assess the progress made in delegating budgets to the new area structure from 1 April 2004.

1.1.2 The purpose of the review is to assess the robustness of the processes and the support mechanisms in place to ensure that budget delegation was successfully implemented. Our objectives were:

• To assess the methodology used to delegate budgets within the new structure.

• To assess the adequacy of budget management arrangements.

• To assess the strength of the financial management framework put in place.

1.1.3 The evidence given at the start of the review, together with evidence given through the work programme proved to be beneficial in enabling a view to be taken on the success or otherwise of budget delegation and the areas where improvement is needed.

1.1.4 The Committee focused on the following areas:

• Allocating the budget to areas

• Policies and Practices

• Management arrangements

• Information

The report details the Committee’s findings in each of these areas and the report is structured accordingly

1.1.5 The Committee was mindful not to confuse the review with the current-year budget overspends incurred by Social Care and Health. The review has very much followed the original terms of reference set out in paragraph 1.1.2 above.

1.1.6 The broad conclusions of the Committee are that:

• The implementation of the new structure required a more in-depth risk assessment.

• Robust systems and processes need to be in place to ensure budget holders are accountable for managing within the budget set.

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• Spending must be within Birmingham City Council’s scheme of delegation.

• Appropriate capacity must be in place to support the strategic functions - i.e. Assistant Director Adult Strategy, Assistant Director Children’s Strategy and Assistant Director Organisational Development and Performance Management - to help take forward the development of frameworks for service delivery.

• A commissioning-led approach would have led to more effective budget management.

• Sufficient time and resources should have been in place to manage the transition from the old to new arrangements.

• Information systems that support the service must be further developed with an emphasis on integration.

• Budget holders must be trained and developed to undertake their financial management responsibilities.

• The Directorate has begun to address many of the key issues identified within this review.

1.1.7 The Committee’s recommendations covered the following areas:

• Commissioning strategies

• Performance contracts

• Budget management

• Management arrangements

• Information

• Financial support for the strategic function

• Development of financial management systems

• Staff training on financial management

• Reorganisation

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2 Terms of Reference

2.1 Reasons for the review

2.1.1 The review was conducted in order to assess progress in delegating budgets to the Area Directors and their teams with effect from 1 April 2004.

2.2 The Committee and its Terms of Reference

2.2.1 The terms of reference for the review were agreed by the Social Care Overview and Scrutiny Committee in July 2004 and are attached at Appendix 1. The review was carried out by a working group of Councillors serving on the Social Care Overview and Scrutiny Committee. Members of the review group were:

• Councillor Len Clark

• Councillor Jerry Evans *

• Councillor Jim Whorwood *

• Councillor Barbara Dring

• Councillor Margaret Byrne

• Councillor Reg Corns

Councillor Evans had to step down from the working group and was replaced by Councillor Whorwood.

2.2.2 Officers from the Social Care and Health Directorate, the Scrutiny Office and Committee Services support the Committee.

2.3 Methodology

2.3.1 Members of the working group were presented with an evidence file at the commencement of the review and this documentation was referred to throughout the review. This included information on:

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• The organisational structure of the Directorate and the finance function within the Directorate.

• Budget documents such as the approved budget report and area budget allocations.

• Accountability frameworks such as the City Council’s cash limited budget rules and the Social Care and Health Accountable Budget Holder scheme.

• Budget monitoring information such as the monitoring timetable and Directorate and Area monthly reports.

• A timetable of key meetings, for example with budget holders.

2.3.2 Area Directors and Area Heads of Resources (who have overall responsibility for the Area finance function) gave evidence to the review group.

2.3.3 The review group received a presentation on the financial systems that support budget holders, i.e. GLAMIS and Carefirst.

2.3.4 Paul Cook from the Recovery Team provided evidence regarding the work of the Recovery Team, weaknesses that have been identified and suggested solutions to address these weaknesses.

2.3.5 The working group met six times in accordance with an agreed work programme - attached at Appendix 2.

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3 Findings - The Context

3.1 Background and Context

3.1.1 As a result of the Directorate being placed on special measures in November 2002, the Council restructured the provision of Social Care and Health and created new organisational arrangements which required major reorganisation.

3.1.2 The Directorate is now made up of four operational areas that are co-terminus with the Primary Care Trusts (PCTs) and four strategic areas of responsibility, i.e. finance, adults’ strategy, children’s strategy and organisational development and performance management (see Appendix 3). With the exception of finance, the Assistant Director appointments were all made from outside the Authority. These appointments were made after the original decision was made to reorganise.

3.1.3 The Directorate was reconfigured into those services that were managed at an area level by individual area directors and citywide services managed by a specific Area Director on behalf of the Directorate. This reorganisation required the Departmental Management Team (DMT) to establish new teams across the Directorate. It was within this context that the new DMT was charged with delegating the budget to areas with effect from April 2004.

3.1.4 The other major priority for DMT which has a direct impact on budget delegation is service improvement to enable the Council to achieve a higher performance rating in 2005.

3.1.5 The review heard that a one-off budget allocation of £1 million was made available to support the reorganisation of the Directorate. However, the lead-in time to make organisational changes such as new buildings spanned over two financial years and in reality the money remained unused in the 2003/04 financial year.

3.1.6 The Strategic Director of Social Care and Health has overall responsibility for services to vulnerable adults and children.

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4 Findings

4.1 Introduction

4.1.1 The review group’s findings can be categorised into four areas:

• Delegating the budget to the areas

• Policies and Practices

• Management Arrangements

• Information

4.2 Delegating the Budget to Areas

4.2.1 Budgets were delegated to the areas and strategic functions from 1st April 2004. Detail regarding the budgets held by each of the Areas and the strategic centre are contained in Appendix 4.

4.2.2 In allocating the budget to the Areas, the Directorate had three options:

• A formula-based approach using the same indices developed by Central Government to allocate resources to the City Council.

• Allocation based on historical spend patterns.

• Adopting a zero-based budgeting approach based on agreed priorities and identified need.

4.2.3 The decision was made to adopt the Government formula approach. This was not supported by detailed activity plans at an area level. In retrospect it would appear that the historical spend pattern approach would have been more appropriate given the restructuring of the Directorate.

4.2.4 Having agreed the Government formula approach, the Area Directors were clearly committed to work together to manage any unforeseen overspends in one area of service delivery by offsetting any underspends in other service/area budgets. A contingency budget for the Directorate was not in place. Given the budgetary pressures faced by the Directorate in the current year, it has not been possible to demonstrate whether collaborative working across areas would have resulted in the effective management of budgets.

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4.2.5 The risk of failing to manage the budget was increased significantly by the absence of an overall commissioning approach across all service areas. Best practice would dictate commissioning strategies should be in place for older adult service, children services, learning disability services, physical disability services and mental health services. These plans would set out service standards, the profile of services and cost and would give operational teams a clear performance framework in which to operate. The absence of such plans was seen to be a major obstacle to sound budget delegation.

4.2.6 The review also found that financial controls were not in place for all citywide services.

4.3 Policies and Practices

4.3.1 The review found that the scheme of delegation within which the Directorate operates was adequate. Also that the City Council’s cash-limited budget rules and the Directorate’s financial arrangements are clear. Whilst the procedures are comprehensive and clear, their application and implementation was inconsistently applied by budget holders. A significant number of budget holders did not demonstrate a clear understanding or commitment to financial regulations.

4.3.2 The review received evidence that budgets have been disaggregated to individual budget holders and there is a schedule of accountable officers for budget delegation. The review also noted that individual budget holders were not required to sign up to managing within the budget set; activity and performance plans were produced separately from the budget.

4.3.3 The absence of key processes and procedures for the consistent application of policies has also added to difficulties. For example, at the time of delegation the roll-out of processes for neither children nor adult assessments was complete. Further, the absence of commissioning frameworks and processes meant that there was not a good picture of the level of need. This has been a key feature of the 2004/05 overspend.

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4.4 Management Arrangements

4.4.1 The devolved financial management arrangements placed area finance teams under the management of Area Heads of Resources, who reported directly to an Area Director. Concern was expressed about whether this was the most appropriate arrangement and consideration was given to whether Heads of Resources should report to the Assistant Director of Finance. Indeed, whether the Assistant Director of Finance should report to the Strategic Director of Resources at the corporate centre.

4.4.2 The complexity of the management arrangements for Heads of Resources is exacerbated further by their other areas of responsibility, i.e. human resources which have on occasion distracted their attention away from their core task of financial management and accountability. There is a tension between their finance function and their other business support functions.

4.4.3 There has been a notable success as a result of the insistence that monthly budget holder meetings are held. Though it was noted that it would be beneficial if there was a requirement to have a standardised approach in the content and format of those monthly meetings.

4.4.4 The delay in making permanent appointments to the key strategic posts of Assistant Director Adults Strategy and Assistant Director Children’s Strategy has resulted in a lack of direction and consistency in developing strategic frameworks such as the commissioning strategy.

4.4.5 The review also found evidence that there has been insufficient capacity within the strategic functions to modernise services and examine new models of social care arising from a commissioning-led approach.

4.4.6 The review also found that financial management is not a core requirement of the job description and there was no evidence that financial management of budgets was addressed through the Directorate’s performance management framework.

4.5 Information

4.5.1 Officers are reliant on a number of information sources which provide financial and activity information. There are four main sources:

• GLAMIS - General Ledger and Information System. This system captures expenditure and full year commitments against profiled budgets.

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• Carefirst - this is the Directorate’s care record and case management system which contains information on each individual service user, their care plan, commissioned packages of care, suppliers of services and the cost of all external services delivered.

• HRIS - Human Resources Information System. This system contains employee costs at an individual, unit, team and area level.

• Pale Blue Book - this is a key control document that is produced monthly, setting out financial projects and activity information at Directorate level.

4.5.2 The review group was informed that weak data management control has resulted in incomplete, contradictory and inadequate financial and activity information.

4.5.3 The complexity of the systems available to support the service and the lack of access to these systems contributed to poor data quality and therefore poor decision-making and control. The review group were informed that less than 20% of financial commitments are entered on the Council’s purchase order commitment system GLAMIS.

4.5.4 GLAMIS is not well maintained from a budget holder point of view. Budgets are not fully disaggregated to individual cost centres. This issue is being addressed as part of setting the budget for 2005/06.

4.5.5 The review heard evidence about the limited integration between Carefirst and GLAMIS. This lack of integration is not aided by the relatively low priority given to updating the care plans and packages of care contained on Carefirst by social workers and business support staff resulting in serious levels of incongruence in financial and activity data. This position prevents the Directorate from identifying accurately the full-year effects of services commissioned against individual care plans.

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5 Evidence provided by Paul Cook of the Recovery

Team

5.1.1 The review received a presentation from Paul Cook outlining the findings of the Recovery Team that had been brought in to look at Social Care and Health’s budget situation in 2004/05. Members were advised of the following problems that have been identified by the Recovery Team.

• Lack of finance and activity plans and a robust business approach.

• Inadequate financial training, no clear sign-up to budgets and unsure systems.

• Combination of citywide and ‘local’ area functions in one single cash limit.

• Need to operate a more robust financial monitoring process.

• Allocated budget does not match activity.

• Late, erratic recording of client commitments on databases.

• Some client databases are not networked.

• GLAMIS and database client identifiers are different. Reconciliation of databases with GLAMIS thus difficult.

• Placement budget forecasts make no allowance for new commitments before year-end.

• Agency staff costs coded to placement budgets, causing financial control problems in both the agency and placement areas.

• Insufficient time and staffing resource for Social Care and Health central staff to check and challenge area forecasts.

• The Pale Blue Book format has been dictated by the financial crisis and demands for an exceptional level of detail. In a more controlled financial environment, the Blue Book will prove too extensive.

• The Pale Blue Book concentrates on variances against budget and does not clearly set out what the budgets are.

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• New GLAMIS release requires development to restore data quality.

• Delays in new finance staff having access to GLAMIS.

• IT support for finance staff is weak.

• Area Heads of Resources not directly accountable to Assistant Director of Finance.

• No demonstrable joint input of Assistant Strategic Directors and Area Directors to finance problems.

• Employee budget generation not robust.

5.1.2 The review group noted that many of their concerns regarding budget delegation and the current financial and activity management arrangements were subsequently reinforced by the Recovery Team.

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6 Conclusions

6.1 Conclusions

6.1.1 Many of the conclusions identified by the review highlight weaknesses in practice around budget management and business support systems. However, there is a lot that officers and Members are doing to address the issues raised. There is confidence that the areas of weakness have been identified. The Committee will be keen to review progress in addressing the weaknesses in order to report confidently that underlying systems and processes are now in place to address the issues identified.

6.1.2 This feeling of change is greatly helped by the work of the Member Steering Group, chaired by the Leader of the Council which has focused on the robustness of underlying systems and processes with a view to strengthening financial management arrangements.

6.1.3 The implementation of the new organisational arrangements require further in-depth review and planning. A more detailed risk assessment of the restructure of the Directorate into area-based teams may have avoided the pitfalls highlighted in this report.

6.1.4 The financial management frameworks the City Council had put in place have not been effective. Underlying systems and processes need to underpin these arrangements, to strengthen the financial management. Budget holders will be required to manage pro-actively within the budget in line with the Council’s scheme of delegation. Work has already commenced to strengthen the financial management framework through the external Recovery Team.

6.1.5 Performance management will be in place from the outset of the new financial year commencing April 2005 which will require budget holders to sign-up to clear performance targets.

6.1.6 There should be formal consultation at officer and Member level about prioritisation of service delivery, around the consistent application of policy and procedures. The budget pressures arising from those priorities should be routinely managed through identified savings.

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6.1.7 A major element of the aforementioned approach should be the requirement to communicate clearly and in advance where pressures might arise, sharing information and seeking resolution, rather than presenting the City Council with a budget overspend.

6.1.8 The issue of capacity must be addressed to ensure there is appropriate support in place. In particular the budget for 2005/06 must include resources to strengthen strategic support functions to safeguard the delivery of commissioning strategies.

6.1.9 The absence of a commissioning approach across the range of services has contributed to the introduction of budget delegation being less effective than it could have been. It is commendable that a commissioning strategy has now been put in place for older adult services. This approach needs to be followed for the other service areas.

6.1.10 Adequate financial arrangements should be put in place to manage the transition from one organisational model to another. The £1 million of one-off resources proved to be inadequate and unusable within the envisaged reorganisation timescale.

6.1.11 Further integration of the Council’s information systems is a priority.

6.1.12 Changes need to be made to the management arrangements, ensuring all budget holders have the relevant skills to carry out their financial management responsibilities and the application of these skills should be a key feature of the performance management arrangements through regular supervision.

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7 Recommendations

Recommendation Responsibility Completion Date Delegating the budget to areas

R1

Reconsider the organisation of citywide services and the financial control mechanisms, i.e. review of learning difficulty services.

Cabinet Member for Social Care and Health

May 2005

R2 Commissioning strategies must be implemented for all areas of service (older adults, children, people with learning difficulties, people with physical disabilities and people with mental health difficulties).


April 2005 (Older People)

October 2005 (Children’s Services and Learning Difficulty Services)

January 2006 (Physical Disability Services and Mental Health Services)

Policies and Practices

R3 Managers must continue to undertake detailed monthly monitoring analysis and forecast the year-end position.


April 2005

R4 Managers must ensure that all budget holders fully comply with the Birmingham City Council’s scheme of delegation.


April 2005

R5 A data flow diagram must be produced to explain the approach to budget forecasting.


April 2005

Management Arrangements

R6 Departmental Management Team to review the devolved financial management arrangements.


May 2005

R7 Financial management must be a core competency in budget holder job descriptions and part of the supervision process applied to all budget holders. This will be supported by a training and development programme.


September 2005

R8 A financial management framework for managers must be implemented for all managers which links finance and performance.


April 2005

R9 The 2005/06 budgets must begin to address issues of capacity within the strategic core of the Directorate, enabling resources to be made available to support the Assistant Director Adult Strategy and the Assistant Director Children’s Strategy in particular.


April 2005

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Information

R10 Clear targets must be implemented to improve the input into the Directorate’s business critical information systems, i.e. GLAMIS, Carefirst and HRIS. A work programme will be drawn up to achieve this requirement.


July 2005

R11 Budgets need to be disaggregated in detail at individual cost centre level.


May 2005

R12

The Directorate key financial control document, the “pale blue book”, must be reviewed and widely circulated to all key budget holders, i.e. Directorate Management Team, Heads of Service and Operational Managers.


May 2005

R13

Area management teams must produce a monthly summary report that clearly identifies potential budget pressures and the measures that will be taken to accommodate them The report will be discussed and key actions will be agreed through the Area Performance Boards.


April 2005

Reorganisation

R14

Major reorganisation or restructuring planned within the City Council should not be undertaken without a prior risk assessment, unless in exceptional circumstances.

Leader of the Council

R15 Progress towards achievement of these recommendations should be reported to the Social Care Overview and Scrutiny Committee on a six-monthly basis until completed.

Subsequent progress reports will be scheduled by the Committee thereafter, until all recommendations are implemented.


First report to be presented in October 2005

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8 Appendices

8.1 Appendix 1: Terms of Reference

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8.2 Appendix 2: Review Work Programme

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8.3 Appendix 3: Management Structure

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social care and health - delegation of budget management ... · 1.1.6 the broad conclusions of the...

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